Good Old-Fashioned Capitalism to the Rescue in Indianapolis’ Inner City

After half a century of doing business in this city, Jack Dickey Jr. was ready to move his family’s machine and tool company to the suburbs two years ago. He wanted to expand and had his eye on a sprawling parcel of land just south of here.

But a curious thing happened. Someone from the mayor’s office called to ask Dickey if he would take a look at an abandoned rail yard that the city had purchased and cleaned up. It wasn’t the best neighborhood, but the city would sweeten the pot by fixing the surrounding sidewalks and streets, and promised to remove any pollutants that might surface down the road. Plus, it would sell the land for about $5,000 an acre, a third what Dickey had planned to pay for the suburban site.

So Dickey stayed in Indianapolis. And in January, the company founded by his grandfather celebrated its 50th anniversary with the grand opening of a $1.6-million plant in a gleaming new inner-city industrial park.

This city’s courtship of Dickey & Son is part of an ambitious $700-million campaign to rebuild its poorest neighborhoods and is perhaps the most vivid example of how the nation is rethinking its strategy to repair its broken inner cities. Indianapolis’s plan does not focus on the construction of affordable housing, job-training programs, massive tax benefits or any of the altruistic efforts fashioned from the urban policy mold of decades past. This city’s approach to urban renewal is about capitalism, pure and simple, and bringing cold, hard cash to gritty slums like Haughville.

As a result, this aging, mostly black neighborhood is being reconstructed, block by block: A rundown red brick building is being torn down to make room for a new pizzeria; a health clinic is scheduled to open in January, followed by a pharmacy next door; the grocery is expanding; a medical supply company just opened for business; and a vacant warehouse that has long been an eyesore was renovated to house a collection of printing, software and automotive parts firms. Other business people are talking about opening a gas station, a carwash and a sandwich shop.

“Having affordable homes is wonderful, but if nobody has a job to pay the rent, they don’t do any good,” said Olgen Williams, head of the Haughville civic association, which is working closely with city officials to resurrect the community’s commercial hub. “If we can give our people more economic opportunities, then we can make this neighborhood work again. We need money power. That dollar talks in America.”

Indianapolis is perhaps the most vivid example of how many American cities are rethinking their efforts to repair impoverished inner-city neighborhoods. Though providing the poor with affordable housing and preparing them for the workplace are still crucial elements, cities are increasingly turning to the marketplace as an engine for social change.

In effect, this strategy looks at urban renewal through the eyes of business. Rather than simply bribing companies to locate in a certain spot with multimillion-dollar tax cuts, the idea is to convince businesses that slums can actually be profitable. There may be more money in the suburbs, the pitch goes, but there’s also a lot more competition. Inner-city neighborhoods, by contrast, tend to have high population densities and hardly anyone chasing after their money.

In this model, it is business that drives the development, largely deciding what type of retail establishment or office park would work well where. Government takes a more reactive role, ensuring that commercial permits, zoning requests or transportation needs are dealt with smartly and swiftly.

“What you have now more than ever is government playing a supportive and catalytic role in nurturing profitable businesses,” said Michael A. Stegman, a Department of Housing and Urban Development official in the Clinton and Carter cabinets and now director of the Kenan Institute of Private Enterprise at the University of North Carolina at Chapel Hill. “That’s a very different kind of urban policy than we had 15 or 20 years ago. And the result is this retail renaissance that’s going on in our inner-city neighborhoods.”

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The concept is hardly new. South Shore Bank in Chicago has for nearly 30 years financed profitable, start-up enterprises in poor neighborhoods, and the late developer James W. Rouse was for years a vocal advocate of using the market to breathe life into the nation’s wheezing slums.

But as the public grows increasingly impatient with entitlement programs and a largely ineffectual urban policy that has cost taxpayers billions of dollars, the notion of “community capitalism” has become a movement -- on Capitol Hill and in corporate offices, at business schools and in city halls.

Programs such as the Community Block Grant Development Program or the Urban Development Action Grant also were intended to jump-start stalled economies, but the money was used largely to subsidize housing construction, convention centers or downtown office buildings. Under the new model, state and municipal officials have become the deal-makers, brokering agreements between the community and local businesses.

“There has never before been a government-based billion-dollar deal-making program,” Stegman said.

Indeed, the resurgent marketplace in Haughville is being played out in parts of Harlem as well, and in neighborhoods across the country: Chicago, Cleveland, Detroit, Baltimore, Kansas City and many others. But while the government has worked to spark interest, it is the private sector that has fueled the transformation, largely by rethinking the assumption that it can’t turn a profit in troubled inner-city neighborhoods.

From NationsBank to Rite Aid, from the Safeway supermarket chain to the shoemaker Allen Edmonds, businesses are setting up shop and making money in some of the nation’s toughest neighborhoods.

“There are enormous opportunities in the inner city,” said Michael Porter, a Harvard business professor and a pioneer in the field. “There’s the perception of crime, there’s a failure to recognize just how much income in the inner city goes unreported and so the buying power is underestimated,” Porter said in a meeting with reporters in Washington, D.C., earlier this month. “And I think some of it, quite frankly, is racism.

“But once you shatter those misperceptions about the market, you can begin to refocus the debate.”

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The idea is not without controversy. Under the community capitalism model, residents with poor job skills--or, say, a learning deficit or chemical dependency--are likely to be left behind, no matter how big the economic expansion going on around them.

And regarding lower-paying service industries, there is a concern that investors will walk away with huge profits, taking money out of the neighborhood only to be spent in their own communities, leaving behind employees whose lives and neighborhoods are only marginally improved.

Indianapolis’s five-year-old “Building Better Neighborhoods” program targets seven neighborhoods for extensive economic and infrastructure development.

“I couldn’t tell you if it’s had an impact on infant mortality rates or the rate of babies born out of wedlock,” said Larry Gigerich, an advisor to Republican Mayor Stephen Goldsmith. “But we do know that the household income has gone up and the number of owner-occupied homes has increased in those neighborhoods and throughout the city as well,” he said.

And the city’s efforts appear to be paying off, he said. The city, for example, spent about $600,000 to buy, clean and market the abandoned railroad property now occupied by Dickey & Son and three other businesses. The city is scheduled to recoup every dime of that investment next spring through increased tax revenue being generated, Gigerich said,

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And the effort so far has been largely good for businesses.

Of the nearly 100 Rite Aid pharmacies scattered throughout New York City, for instance, the store located on 125th Street in Harlem sells more prescriptions than any other, said Jamie VanBremer, a spokesman for the company.

In Indianapolis, several entrepreneurs say that setting up shop in the Haughville neighborhood has so far been both profitable and a pleasant experience.

The owner of Dickey & Son said that business has never been better since it moved to Haughville. The company’s backlog on orders is nearly six months long, Dickey said, and he may have to add a third shift just to keep pace.

Dickey said the neighborhood’s fortunes also seem to be picking up. “One thing we’ve noticed since we moved here was a lot of people started redoing their homes, fixing them up and painting them and installing vinyl siding and whatnot,” Dickey said. “And a lot of them look good as new.”

And the people have been remarkable, Dickey said. “When the plant is closed in the evenings and on the weekends, they call police if they see anybody messing around on our property. I was really ready to pick up and move, but the city just did everything to get us to stay,” he said. It’s just really worked out great for everyone, from what I can see.”